THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WOLF BLITZER, HOST: Allegations of torture by the Bush administration under the microscope. Congress launches a politically-charged investigation. And the presdietn reverses course on releaseing photos of detainees.

Plus, it could be a make or break moment for Middle East Peace. President Obama is preparing to meet with the Israeli and Palestinian leaders. Former British Prime Minister Tony Blair, he joins us to set the stage.

And the billionaire entrepreneur Sir Richard Branson, his take on the global economy and how he can run an airline cheaply and safely and still give passengers perks.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE STUATION ROOM.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The publication of these photos would not add any additional benefit to our understanding of what was carried out in the past by a small number of individuals. In fact, the most direct consequence of releasing them I believe would be to further inflame anti American opinion, and to put our troops in greater danger.

(END VIDEO CLIP)

BLITZER: A major reversal from President Obama, moving to block the release of hundreds of photos showing alleged abuse of prisoners in Iraq and Afghanistan. Just weeks ago, the White House was ready to let the photos be made public. So what's behind the sudden turnabout?

BLITZER: Did the president make the right decision in reversing himself this week in saying he does not want those photos of prisoners in Iraq and Afghanistan allegedly abused, he does not want those pictures released?

FEINSTEIN: I actually support him in that. These pictures were taken at about the same time as the Abu Ghraib photos. So we know what they -- it's more of the same, and I don't think that another big, transparent release of all of these photos to go all over the world helps our troops who are fighting in Afghanistan and trying to maintain a more peaceful situation in Iraq.

So I believe that what he's going to do is utilize the national security exception, which was not used, I understand, in the lower court when this is now on appeal. And hopefully he'll be successful.

BLITZER: Have you seen these actual photos, the hundreds that have not yet been released and he says he doesn't want to see them released?

FEINSTEIN: No, I have not. I've asked that they be given to the Intelligence Committee. I think they could be very useful to us in the study we are now doing on detention and interrogation. And we should have the opportunity to have that as part of the material we evaluate.

BLITZER: Because some of his critics say that, you know what? He's not being consistent. He didn't use that national security argument a month ago when he released those legal memoranda authorizing enhanced interrogation techniques, what some call torture, even though that could have undermined intelligence officers' morale at the CIA or elsewhere.

Is he being inconsistent in what he wants to release and what he doesn't want to release?

FEINSTEIN: No, I do not believe it's inconsistent, and I'll tell you. They are very different.

We know what these photos contain, by and large. The OLC opinions have been requested by two committees, both Intelligence and Judiciary.

BLITZER: The OLC is the Office of Legal Counsel, the legal opinions.

FEINSTEIN: The office -- yes, and I hate using an acronym. The Office of Legal Counsel opinions are really within the jurisdiction of the oversight of the Judiciary Committee. And therefore, the Judiciary Committee and its chair, Pat Leahy, have been asking for them for at least two years and haven't received them, and haven't been able to look at them, evaluate them, see if they do in fact match existing law and international conventions to which we are signatories. And I think that's a legitimate reason for the release.

BLITZER: The House speaker, Nancy Pelosi, says that when she was the ranking Democrat on the House Intelligence Committee, she was misled by the CIA. She goes further. She says members of Congress are routinely misled by the CIA in their briefings on sensitive intelligence-related matters.

You've been a member of the Senate Intelligence Committee for a long time. You're now the chair of that committee.

Do you believe the CIA routinely misleads members of Congress about sensitive issues?

FEINSTEIN: Well, I'll answer that, but let me say something, first of all, about the speaker. I have never known her not to tell the truth, and I have known Nancy Pelosi for at least the past 30 or 40, 50 years. So this is a longstanding knowledge, and I have never seen her not tell the truth.

So this is a longstanding knowledge, and I have never seen her not tell the truth. So I think that's worth saying.

Secondly, with respect to the briefings, I obviously was not present. I was not briefed until some four or five years later.

These briefings, the ones that I've been in, are very bland. They're antiseptic. They are given in the most benign way.

You are generally alone. You cannot take notes. You have no staff. You have no one really to discuss it with other than perhaps if you're being briefed with another person.

I think all of it should be relayed to the full committee with the classified staff that's present so there can be a back and forth, questions can be asked, questions can be answered. And I'm going to seek to change it in an intelligence bill that we will be doing very shortly.

BLITZER: So I take it you basically agree with her that over the years, at least in your personal experience as a member of the Senate Intelligence Committee, I don't know if you want to go as far as to say you've been misled, but you certainly feel that you haven't been satisfied in the kinds of briefings that you've received.

Is that right?

FEINSTEIN: Well, that's right. As a matter of fact, I did have a follow-up briefing with General Hayden when I heard. I did indicate my concerns, but it took some time, and time to understand what was happening.

BLITZER: General Hayden when he was the CIA director?

FEINSTEIN: That's correct.

BLITZER: And do you feel now, with Leon Panetta, someone you know very well, former member of Congress from California, former White House chief of staff, do you feel that you are right now getting the information you and your colleagues on the Senate Intelligence Committee need to know to conduct proper oversight?

FEINSTEIN: We have a commitment from Mr. Panetta and from Director Blair, who overseas all 16 intelligence agencies, that we will have every cable, every document, every piece of paper that is relevant unredacted. So we -- and every e-mail. So we will have a complete dossier of everything that happened to and about every high-value detainee.

BLITZER: This is what "The Wall Street Journal" is now reporting. Let me read it to you.

"The Obama administration is weighing plans to detain some terror suspects on U.S. soil indefinitely and without trial as part of a plan to retool military commission trials that were conducted for prisoners held in Guantanamo Bay, Cuba."

What do you know about this?

FEINSTEIN: I know of no plan right now to put anybody on American soil. That has not been shared with me. I will inquire and see if there is such a plan.

However, I do know this: There are probably some people at Guantanamo who need to be classified, if they aren't already, as enemy combatants, and a process set up to review their detention. And they should, in fact, be kept in detention and not released into the community at large.

BLITZER: In detention in the United States and on U.S. soil?

FEINSTEIN: Look, there are a whole raft (ph) of major terrorists that are in high-security prisons in the United States. There's all the 1993 World Trade Center bombers that are there. There are at least 12 to 15, and I will be making those names available.

They don't escape. They are held in solitary. The prisons are designed for that.

And so this (INAUDIBLE) which is largely used by Republicans to say, oh, the Democrats want terrorists in your neighborhood, in your community, that is a lot of baloney. That is not true. And that's the message that is being pushed because it frightens people.

We have very good maximum security prisons. They are isolated, their security is high, the individuals are kept virtually incommunicado, and there are more than a dozen terrorists in these facilities now. And no community, no neighborhood is affected by them in the least.

BLITZER: They're called super max, some of these penitentiaries.

FEINSTEIN: That's exactly right.

BLITZER: All right.

FEINSTEIN: And one was built specifically for this.

BLITZER: Senator Feinstein, thanks very much for joining us.

FEINSTEIN: You're very welcome. Thank you.

(END VIDEOTAPE)

BLITZER: It's one of President Obama's top priorities. (BEGIN VIDEO CLIP)

BLITZER: We are not going to rest until we've delivered the kind of health care reform that's going to bring them cost per families and improved quality, affordability, and accessibility for all Americans.

(END VIDEO CLIP)

BLITZER: Well, what shape will it take? And what about Social Security, not projected to run drier sooner than anyone thought. I'll talk about that and a lot more with the White House domestic policy advisor Melody Barnes.

Also, the Taliban changing tactics in Afghanistan. How does the U.S. stay one step ahead? Advice from the author of the new bestseller, "The Age of the Unthinkable," Joshua Cooper Ramo.

Plus, CNN political contributor James Carville. He says Republicans will get spanked at the polls for generations. I'll ask him why.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: When it comes to health care spending, we are on an unsustainable course that threatens the financial stability of families, businesses, and government itself.

(END VIDEO CLIP)

BLITZER: President Obama's taking new steps this week toward achieving comprehensive health care reform. He says it can be done this year. This House Speaker promising to get a bill to the floor before Congress goes into recess in August. I spoke with the White House domestic policy adviser Melody Barnes and asked her if the president has completely ruled out a government run single payer system.

(BEGIN VIDEOTAPE)

MELODY BARNES, WHITE HOUSE DOMESTIC POLICY ADVISER: The president believes strongly that we have to build on the system that we already have. He wants to move quickly and efficiently to get health care done, make sure that it's quality and affordable for all people. So in doing that, we believe that we have to build on the system. But we have heard from people who care deeply about moving forward with the single payer system. They were involved in our health care reform here at the White House. I met with some people out in Michigan. My colleagues have done the same in other parts of the country.

So we've heard from them. We understand their interests and their concerns. But at the same time, we believe that we have to move forward. And I think there are many members of Congress who have been long time supporters of a single payer system, who would say I believe in that, but I believe that we've got to build on the employer based system that we have today. BLITZER: All right, so that's an answer there. Max Baucus, he chairs one of the key Senate committees that's taking a whole look at this. He thinks you should consider taxing some of the health benefits that employees get from their employers, sort of like, just like income. In fact, listen to what he says.

MAX BAUCUS (D) FINANCE CHAIRMAN: ...look at ways to modify the current taxes version, so it provides the right incentives. And we should look to ways to make it fairer and more equitable for everyone.

BLITZER: Are you open to taxing those kinds of health benefits that so many of us receive from our employers?

BARNES: Right, Wolf, well as I'm sure you remember from the campaign, the president expressed very serious concerns about taxing health care benefits provided by employers. And the president still has those concerns.

He said, look, let's bring everyone around the table. Let's put all the issues on the table and have a full debate about these issues. But he still has those concerns. He recognizes that we have to pay for the system. He's made that commitment. He made it in his budget. He's working with Congress to get it done, but he's got concerns about that approach.

BLITZER: So I'll take that he's going to try to resist any such urge from whether Senator Baucus or anyone else, is that right?

BARNES: Well, he's got - he still has the same concerns that he expressed on the campaign trail.

BLITZER: All right, let's talk about what they call tort reform. Are you open to limiting the opportunity for individuals through their attorneys, suing doctors and hospitals, seeking medical malpractice in order to try to bring down the overall cost of medicine in the country?

BARNES: Well, this has certainly been a hotly debated topic. I remember the debates when I was up on the Hill working on this issue. And we've recognized that there are some doctors in some parts of the country that are paying high medical malpractice on premiums.

At the same time, we know that that's a relatively small amount in the overall health care system. What we believe is that we have to address these issues on the front end, that we have to make sure that people are getting quality health care from the beginning, and then also work with Congress to find ways to address this problem.

Again, the president has said let's put all the issues on the table. He's not trying to stifle the debate, but he believes that there are a lot of different ways to approach this problem.

BLITZER: We heard some very disturbing numbers about Social Security, the trust fund, the Medicare trust fund, given the recessions, what's going on, the limited amount of money coming in to the system, a lot of the money going out of the system. It looks like it could go broke a lot sooner than we had anticipated.

Is the Obama administration open to the idea of raising the age limit, the age requirement to be eligible for Social Security and Medicare from 65, 66, raise it to 67, 68 or 69, something like that in order to deal with the fundamental economic problems?

BARNES: Well, you're exactly right, Wolf. We saw these numbers, the trustees report. We were very concerned about them. At the same time, we recognized that this really what this means is that we have to get health care reform done.

Because of the sagging economy, there's fewer coming - less coming in, which means that we have this concern about these two trust funds going down faster than we had anticipated.

This means health care reform is absolutely necessary. This is a way to drive down costs. This is a way to address some of the problems in the system. And coupled with the proposals that the president has already made in this budget, looking at the Medicare advantage system so that we're not paying a middle man to provide health care to our seniors.

BLITZER: So do I - am I hearing you say you're going to be opposed to any raising of the age?

BARNES: Well, the president has said on issues of Social Security that he wants to work with Congress and others to address those problems. And he's open to listening to their suggestions. But we already believe that we've put a number of proposals on the table to address the problem that the trustees report reflects today.

(END VIDEOTAPE)

BLITZER: Melody Barnes speaking with me earlier.

Take a look at this. Back in 1994, when Hillary Clinton was spearheading reform, the United States spent more than 13% of its Gross Domestic Product on health care. By 2006, the U.S. spent 16% of GDP on health care and a federal agency now estimates that by the year 2017, more than 19% of Americans economic outlook will be devoted to health care spending.

In the 21st century, the world is changing quickly and constantly. Just ahead, the bestselling author and journalist Joshua Cooper Ramo on what he calls the age of the unthinkable and how world leaders and all of us can stay ahead of the curve.

And Pakistan in peril, fears persisting right now that the country's nuclear weapons could fall into the hands of terrorists. The former British Prime Minister Tony Blair, he's here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

WOLF BLITZER, CNN ANCHOR: So what do the Islamic militant group Hezbollah and some Silicon Valley high-tech firms actually have in common? A lot more than you might think.

Joining us now is Joshua Cooper Ramo. He's a former foreign editor of "TIME" magazine. He's now managing director of Kissinger Associates. He's also the author of a brand new book entitled "The Age of the Unthinkable." It offers ideas on finding security and success in a chaotic, constantly changing world.

BLITZER: I want to get to the Hezbollah/Google connection in a moment, but let's talk about "The Age of the Unthinkable." Why the title, "The Age of the Unthinkable"?

RAMO: The title comes right off of just watching CNN in any given afternoon. I mean, what you find now is that we're constantly confronted by things that we couldn't have imagined even a year ago, whether it's the collapse of the U.S. financial system or the fact that a war on terror in Afghanistan now puts us on the brink in Pakistan.

There's a whole structure to the world that's emerging now that challenges our old ways of thinking. And not only that, makes our old ways of thinking dangerous in some cases.

BLITZER: And some of the conventional wisdom of the past you say is exactly the opposite of what we need right now.

RAMO: Right. It backfires. The war on terrorism produces more dangerous terrorists.

BLITZER: Well, let's talk about that.

RAMO: Yes.

BLITZER: You say the war on terrorism actually creates terrorists, as opposed to eliminating them. Why?

RAMO: Well, not only does it create them, as we've seen in places like Afghanistan or Pakistan. But when you use military force alone, you have the effect of disenfranchising huge parts of the population. But also, the terrorists learn.

And one of the things I did in this book was spend time with revolutionaries around the world. So I spent time with Hezbollah. And one of the people I met with was the head of technology for Hezbollah, one of the guys who handles their tech space.

And he said, you know, "Every time we're attacked we only get stronger. We simply evolve. We find new ways to develop new ideas to attack Israel." And that's the danger, is that when you're dealing with these highly-resilient forces, they don't disappear when you attack them, they learn, they evolve. They're like viruses.

BLITZER: So is this war on terror that the U.S. is now escalating in Afghanistan, for example, and parts of Pakistan, is that a mistake?

RAMO: Yes, the way they're conducting it is going to be misguided, unless you have the civilian support there. If you look at the record of insurgencies in the last 50 years, the record is basically 22-0 in favor of the insurgents. The overwhelming lesson is that military power alone cannot...

(CROSSTALK)

BLITZER: It seems to be working in Iraq, though, isn't it?

RAMO: Well, it does, but the case you would make in Iraq is that what happened is you took the time to build the civilian institutions that really mattered. And the problem we have today, particularly in a place like Pakistan and Afghanistan, is we don't have that civilian surge capacity to get in there and build things.

And one of the things I learned spending time with Hezbollah is when you travel with them in southern Lebanon, you see as much as they're building places to launch rockets, they're building houses and schools and hospitals.

BLITZER: So Hamas sort of does the same thing, and we'll talk about that in a moment.

So what should the U.S. and its NATO allies be doing in Afghanistan right now?

RAMO: Well, the most important policy is exactly like this, which is to try to think of it as a system, to learn from Hamas and Hezbollah. As terrifying and as difficult it is to learn from organizations that are so committed to evil, there's a reason they're able to survive, there's a reason they're resilient.

One reason is they invest all of this energy in helping civilians. The second is they're incredibly...

BLITZER: So, instead of going out there with special commandos, or whatever, and trying to kill as many of the Taliban and al Qaeda forces in Afghanistan or Pakistan, for that matter, you would go ahead and give foreign aid, build schools and hospitals and bridges, and things like that?

RAMO: That's right. You do have to kill some of them.

Now, one of the people I spent time with for the book is a guy named Aharon Farkash, who was the most successful general of Israeli military intelligence for a long time. And he was kind of the pioneer of this idea that the best way to attack terrorists wasn't a mass strategy, but was a highly-targeted strategy, which, by the way, is what's worked so well in Iraq. And a combination of that, with a civil strategy, is what you need.

BLITZER: Here's what you write in the book "The Age of the Unthinkable." "You don't dare draw a moral equivalency between the crimes of Hezbollah and, say, the innovations of Google, but you can see in each the workings of a powerful energy -- the imbalance of 500 fighters against 30,000 soldiers or two university students remaking the World Web from a dorm room."

All right. Explain -- elaborate a little bit on what you mean.

RAMO: You know, there's this sort of revolutionary instinct that exists. And we're definitely living in a revolutionary age. And in a revolutionary age, you see the destruction of the old order and creation of new sources of power.

And one of the things I found as I worked on this book as I traveled from hedge fund managers, to guys in Silicon Valley, to terrorists, was there was this thread of people who got the energy of this revolutionary age and were intent on disrupting as much as possible. So the future that lies ahead of us now is one of more and more disruption. It's basically a race between disruption for good and disruption for bad.

BLITZER: Is "The Age of the Unthinkable," your new book, an optimistic book or a pessimistic book?

RAMO: Ultimately, it's optimistic, because I think the lesson of the world is when you give people the power to disrupt, when you say you can invent the kind of life you want to invent, 99 out of 100 do something spectacular with it. And all the innovation that is producing deadly experiences in some parts of the world is also producing bioengineering to make our health better, it's producing ways to look at the world and get information that we've never had before.

The challenge is that many of the things we rely on to be modern -- financial markets, airplanes, bioengineering -- are as dangerous, to some degree, as they are helpful. And so we've got to learn to balance that.

BLITZER: The book is entitled "The Age of the Unthinkable: Why the New World Disorder Constantly Surprises Us and What We Can Do About it."

The author, Joshua Cooper Ramo.

Joshua, thanks for coming in.

RAMO: A pleasure to be here.

(END VIDEOTAPE)

BLITZER: The future in outer space.

(BEGIN VIDEO CLIP)

RICHARD BRANSON: The space that will hang from the middle of the mother ship. And this mother ship will be able to take the space ship up to 60,000 feet where the space ship will be dropped off and head off into space.

(END VIDEO CLIP)

BLITZER: With the shuttle program set to end next year, what's ahead for the next generation of space travel? The entrepreneur Sir Richard Branson, he's here in THE SITUATION ROOM to talk about his plans to make trips into space accessible and affordable for you.

And then they have the presidency and both houses of Congress. James Carville tells us why he thinks the Democrats will be in charge for the next 40 years.

(COMMERCIAL BREAK)

WOLF BLITZER, HOST, "THE SITUATION ROOM": President Obama is set to meet with the Israeli prime minister, Benjamin Netanyahu, at the White House on Monday. Mr. Netanyahu may find himself on the defensive over his unwillingness, at least so far, to see the Palestinians carve out a separate state.

Joins us now is the special Middle East envoy, the former British prime minister, Tony Blair.

Prime Minister, thanks very much for coming in.

Is this a make or break moment in the Israeli-Palestinian peace process that's coming up in the next few days?

TONY BLAIR, SPECIAL MIDDLE EAST ENVOY: I think it's a very important moment. I mean it's a moment of opportunity because you've now got a new Israeli government, a new administration, the U.S. -- the new U.S. administration is determined to press forward.

So, yes, I think it's a pretty important moment.

BLITZER: Is -- you met with Prime Minister Netanyahu on many occasions over the years.

Do you believe he will be ready to commit to what the U.S. wants, the British want, the United Nations -- the so-called road map -- a two- state solution, Israel and Palestine?

BLAIR: Well, it's for him to say. I mean I hope so. I think the crucial thing is this, really, that there are people in Israel who will say we're against a Palestinian state altogether. But then there are also people who will say, provided we could be sure that this Palestinian state is going to be a stable and secure neighbor, then I think we can be in favor of it.

And I think and hope that Bebe Netanyahu is in the second category. In other words, what he will say is, yes, I can envisage a Palestinian state as the end game, but we need to make sure that that Palestinian state is secure and stable as a partner for Israel.

Now, I think the international community will say well, that's fine. Now let's, under that heading, put the substance of what's going to happen on issues to do with economic development, things like settlements and -- and obviously, of course, building the Palestinian security capacity.

BLITZER: Because you've heard him and other Israelis say you know what, they withdrew completely from Gaza, the Palestinians took over and what did the Israelis get?

They got rockets coming in, sometimes on a daily basis, from Gaza into Israel. And their fear is if they withdraw from the West Bank and the Palestinians take over completely there and the Israeli military pulls out, you would even have rockets closer to Tel Aviv or Ben Gurion Airport or Jerusalem, for that matter. That's their -- their argument.

BLAIR: Yes. And that's why it's unacceptable for Israel to have a Palestinian state, on the West Bank, as well as Gaza, in which extremists or people who are likely to try and target Israeli civilians are in control.

BLITZER: Well, how do you guarantee that, because Hamas is very popular in Gaza, and certainly at least among some on the West Bank?

BLAIR: My view of this is that provided there is a clear momentum for a negotiated two-state solution; provided we take, then, the action on the ground that reinforces that momentum, my view is the overwhelming majority of Palestinians are prepared to live side-by-side with Israel in peace.

The question is, how do we restore, now -- and this is why this is such an important moment -- how do we restore, we invigorate credibility into the whole process?

BLITZER: Because the Palestinians are deeply divided, as -- as the president of the United States gets ready to meet with the Palestinian Authority president, Mahmoud Abbas. You know, he comes to Washington with a divided Palestinian community, between Fatah, his faction, and Hamas, his opposition.

BLAIR: It's true. But he also comes to Washington, I think, with the knowledge that for the overwhelmingly majority of Palestinians -- and remember, you know, the majority, two thirds of them live in the West Bank. It's the vast majority of the territory. Even in Gaza, Hamas may have a military grip, but politically, provided President Abbas can show that this thing is really going to move forward, that the Palestinians could actually see this vision -- you know, tangibly touch the vision of a two-state solution, then I think he will have them with him.

BLITZER: Is it realistic -- and you study this issue -- to believe that economic sanctions or diplomatic pressure, short of military action, can stop the Iranians from going forward with a nuclear plan try to build a bomb?

BLAIR: There's nothing as important. It's got to be made clear to Iran that nuclear weapons capability is unacceptable.

I think that it is possible for there to be a diplomatic solution and it is possible for sanctions to work. But it is only possible in circumstances where the international community is completely united and completely resolved.

BLITZER: Because right now, there seems to be some split, the U.S. and Britain, for example, on the one side; Russia and China, are not so -- not so strong, necessarily.

BLAIR: Well, I think that's where you've got to agree to a goal. And that goal should be that -- that Iran does not acquire that nuclear weapons capability. If they did so, I think it would destabilize the whole of that -- that region.

So I think it's a question of saying, look, we're going to try a new approach. We're going to engage with Iran. We're going to try and persuade them that there is a way that they can be a full part of the community of nations, as it were. We recognize Iran's potential contribution.

But there is a bottom line. And the bottom line is that -- that they have got to stop supporting terrorism around the region and they cannot acquire a nuclear weapons capability in defiance of international conventions.

BLITZER: There's a story in the Israeli newspaper, "Ha'aretz," that says -- that says that the president of the United States has basically -- and let me read to you from the story -- "President Obama has sent a message to Prime Minister Benjamin Netanyahu demanding that Israel not surprise the U.S. with a military operation against Iran."

Now, what, if anything, can you tell us about that?

BLAIR: I mean I don't -- I don't know what messages have been passed back. But I think -- look, one thing has been clear. We're, at a moment that is one of enormous opportunity. It's also a moment for important decisions to be taken. And it's -- essentially, it's a moment of truth, if you like. I mean where are we going to go from -- from here and now?

And I think, over the next few months, we will see more clearly the relationship between how we can move forward the Palestinian-Israeli question and now that, then, affects this issue to do with Iran and the threat that it poses.

BLITZER: You know, how much time do you think there is before the Israelis have to make a decision -- they say an existential decision -- as far as whether to use military force?

BLAIR: It's difficult to judge, but I think -- I think all these issues are pretty urgent.

BLITZER: So you think a year or two years?

BLAIR: Well, I don't -- I don't think you can put a precise time on it. But I think one thing is -- is for sure. This region either moves into a different place, where people can see the prospect of negotiated solutions to problems and nations previously hostile reaching out to one another, or it will flip back.

BLITZER: And speaking of nukes, the Pakistani nuclear arsenal is a subject very sensitive. You've studied it.

Should the West -- should the world feel confident right now that none of that -- those nuclear bombs in Pakistan or related equipment could get into the hands of Taliban, al Qaeda or terrorists?

BLAIR: Well, I think the very fact that we talk about that possibility and how serious it would be underscores the need to -- to take urgent action now.

I mean, you know, I think there is a -- look, there's a sense -- and King Abdullah of Jordan, when he came here and saw the president, was really, in a way, offering, on behalf -- on behalf not just of the Arabs, but, in a sense, of the Muslim world, and the possibility for modern-minded and moderate and serious, sensible people within the world of Islam to join hands in partnership with people in the West and say, look, how do we make sense of the conflicts we've got?

How do we bring justice to the situation of the Middle East and how do we make sure that we, in alliance, can stop those extremists and reactionaries who want to take the world backward?

I mean that's why this is all important at the moment. And Pakistan is yet -- yet another aspect, if you like, of what is basically my -- in my view, the same picture.

BLITZER: Prime Minister Blair, thanks for dropping by.

BLAIR: Thank you.

BLITZER: Appreciate it.

(END VIDEOTAPE)

BLITZER: He's an adventurer who's raising the bar for air travel. The head of Virgin Airlines Sir Richard Branson is here with his take on the economy and how he plans to help the average person travel into space.

And Democratic strategist James Carville thinks his party is set to spank the Republicans for the next four decades.

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

WOLF BLITZER, CNN ANCHOR: He's one of the richest and most business savvy men in the world, and you likely use one of his products or his services. Whether it's music or cell phones or travel, the company named Virgin is closely identified with Sir Richard Branson, entrepreneur, activist, adventurist.

He's here in THE SITUATION ROOM.

Sir Richard, thanks very much for coming in.

SIR RICHARD BRANSON, CEO, VIRGIN GROUP: Thanks for having me. BLITZER: You know this global economy. You deal with it every single day.

Are you seeing some light right now at the end of this tunnel?

BRANSON: In some of our businesses. And in some of our businesses, not particularly. For instance, Virgin Atlantic, across the Atlantic, is suffering. And we haven't seen many green shoots yet. Full planes, but tremendous bargains for people who want to travel. Some of our other businesses, we are beginning to see a slight upturn.

BLITZER: Which businesses?

BRANSON: Well, let's say, health clubs. People, even if they're out of work, seem to be happy to go into health clubs and try to keep fit and healthy. Our mobile phone business, people seem to be spending a lot of time on the mobile phones.

So some businesses beginning to see a bit of an upturn.

BLITZER: When you think of Virgin Atlantic and now Virgin America -- I recently flew Virgin America from Los Angeles to here in Washington, D.C. -- it was relatively cheap compared to some of the other airlines. There were TV -- live TV -- I could watch CNN while I was flying across the country. You do that on JetBlue as well and some of the other airlines.

You have Internet ability to log on and see what's going on. You have comfortable seats..

How do you deal with the price factor, and yet, at the same time, provide some of these perks that are so essential in a competitive aviation industry?

BRANSON: Well, I think the realize our airline survived 25 years is that we've gone for quality. So we've tried to make sure that in every single area we are the best.

So, you know, Virgin Atlantic introduced -- we were the first airline in the world to introduce seat-back videos in all our economy class seats. You know, stand-up (ph) bars. Just trying to get -- you know, the first airline to introduce premium economy for people who wanted a bit more legroom in economy.

And I think if you can be the best in any field, you're the best hotel or the best club or the best airline, you will survive and you will do well. And you will also get high-low factors so you can be competitive on fares.

BLITZER: And right now we're focusing in here on this horrible plane crash in Buffalo, New York. Fifty people were killed, and now suggestions the pilots may not necessarily have been well trained for that kind of weather situation or may have been exhausted because they were commuting across the country to catch up to their flights.

How do you deal with this issue of security and safety to make sure your pilots are really up to any contingency that could develop?

BRANSON: Well, nothing else matters more than safety. We've had 25 years at Virgin of never having an incident. We make sure that we -- you know, we have pilots that got long track records before we take them on. And I think if you run your airline properly, the chance of an incident is extremely, extremely slim.

BLITZER: So you're not looking for a bargain in terms of paying a pilot or flight attendants, for that matter, a little bit less in exchange for maybe reducing the quality?

BRANSON: No, quite the reverse.

BLITZER: You want to pay to make sure that -- you say there's nothing more important than safety.

BRANSON: There's nothing worse than waking up one day to get a call to say that you've had an accident. And it's something which I never want to have to experience.

BLITZER: All right.

You've also pioneered this notion of space travel for regular folks. And you made a prediction a few years ago that it was going to happen sooner, rather than later.

Where does that stand right now?

BRANSON: Well, it's very exciting. I mean, Virgin Galactic is the first commercial spaceship company ever.

Our mother ship, which I think there's a picture of behind, which will take the spaceship up to 60,000 feet and drop it off is complete and it's flying. The spaceship will start its tests in December and will go -- and those tests will carry on over the next 18 months, and then we'll start taking people into space. And it's the start, I think, of a whole new space era.

BLITZER: So you expect -- how much is this going to cost somebody who wants to go for a ride, let's say, in two or three or four years in space? Any idea?

BRANSON: Well, initially, it will be $200,000.

BLITZER: For how long of a ride will that be?

BRANSON: The whole experience is a three-hour experience. So it's a sub-orbital space trip.

BLITZER: Is there a market, folks who can afford $200,000 for a three-hour ride into space?

BRANSON: Yes. I mean, we have already got 300 people who paid up their $200,000.

BLITZER: They paid in advance? BRANSON: Yes. They're the initial pioneers. But in time, I think we'll be able to get the price down.

New Mexico building a beautiful space port. And I think in time will go from sub-orbital to orbital flights.

BLITZER: So these flights will take off from New Mexico? Is that what you're saying?

BRANSON: They'll take off from New Mexico.

BLITZER: And that will be the hub, if you will, for space travel on your new airline?

BRANSON: Yes, that will be the hub, I think, for space travel in the future, period, because they're the only people who are building a space port in America. We may build another one in the Middle East, and we may build another one in Australasia. But we'll only have about three space ports in the world.

BLITZER: It sounds very exciting and we'll look forward to that.

On a very, very different subject, Darfur, what's going on is awful, as we all know. You recently did, what, a three-day hunger strike?

BRANSON: I took over for Mia Farrow, who was beginning to get quite weak and ill from her hunger strike. And I did a three-day hunger strike. And basically what we're trying to do is to say to President Bashir...

BLITZER: The president of Sudan.

BRANSON: ... of Sudan, yes, you've been indicted by the International Criminal Court, but it does not help your citizens to then kick out all the aid workers from Darfur, and with the result that a million people will be suffering. Let those aid workers back in again. And we're just trying to keep Darfur and keep the crisis there in the news.

BLITZER: So, for three days you just drank water? Is that right?

BRANSON: I just drank water. I'm sure it was good for me. Mia Farrow did 12 days, which was very brave, and she's just asked a number of other people if they could continue it with three days each.

BLITZER: And Peter Gabriel took over for you. Is that right?

BRANSON: And Peter Gabriel is in the process of doing it in the moment.

BLITZER: How did you feel during those three days?

BRANSON: You don't feel great when you don't eat for three days. I think somebody cruelly brought out the sausage rolls on the last day. But -- and left them in front of me. But if you're just hungry, as a lot of people in Darfur are, and going without food completely, then obviously you're going to feel a hell of a lot worse.

BLITZER: He says Democrats will be in charge for 40 more years. Democratic strategist James Carville isn't wearing a trash can on his head any more. Why he says the GOP will keep getting spanked.

And Pope Benedict waves to the crowds in Bethlehem on the West Bank. His Middle East visit, one of our hot shots of the week.

(COMMERCIAL BREAK)

BLITZER: He says his party will keep winning and winning and winning and Republicans will keep getting spanked. His new book is entitled "40 More Years: How the Democrats will Rule the Next Generation."

Let's bring in our Democratic strategist CNN political contributor and author, James Carville.

This is the new book. James, thanks very much for coming in. You did say the Democrats are going to keep on winning and winning and winning? What do you base that on?

JAMES CARVILLE, AUTHOR, "40 MORE YEARS": Well, I base it on several things. First of all in presidential politics, party dominance is the norm in modern American history. I mean, from 1896 to 1932, there was only one Democratic president. From '32 to '68, only one Republican president. In the last 40 years up to 2008, there were 28 years of Republicans, 12 of Democrats.

I wouldn't suggest that we're going to win every election, but I think the tide is going to shift. And we're going to win a lot more than we lose.

BLITZER: Because it was only a few years ago, you'll remember the midterm election back in 2002, when the Republicans did really, really well. Democrats didn't do so well. We've got the videotape of that night. Watch this.

(BEGIN VIDEOTAPE)

TUCKER CARLSON: It's a bad night for Democrats. James Carville feels the same way.

CARVILLE: I kind of got my head in the right place.

(END VIDEOTAPE)

BLITZER: Nice garbage can over your head, James. All right, that was a bad night in 2002. It was only -- not that long ago. What has basically happened?

CARVILLE: Well, in the 2000 election, young people 18 to 29 voted 49- 48 for Gore, which was roughly 50/50, the election was. By 2004, it shifted eight points in John Kerry's favor. By 2008, it was 2-1, 66- 32.

The truth of the matter is that the key demographic here has turned decidedly Democratic. And as they come up through the system, they're going to retain their Democratic voting behavior. And it all augurs well for the Democratic party.

BLITZER: Well, because the point is in 2002, the Democrats were in a rut.

CARVILLE: Right.

BLITZER: And they came really back in the years that followed. How can you say that the Republicans, they're in a rut right now, but in two years or four years or six years, they might not come back?

CARVILLE: I'm not saying that -- and they'll do better. They'll do better in 2010 than they did in 2008. They'll probably pick up seats. But the underlying demographics do not favor the Republicans. Every growing demographic in this country, be it Hispanics, be it single people, be it young people who obviously are going to go through the system in the future. They're going to be -- 40 years from now there are going to be a lot more voters who can currently 25 than voters who are currently 65.

BLITZER: So these Republicans now who are out of this so-called listening tour, Eric Cantor among others, and they're trying to understand what's going on and trying to restructure their party. Do they have a chance?

CARVILLE: Well, yeah, I mean, they have a chance. They're going to get better. They're going to adjust. It's not -- they're not going to sit here -- and the book title is certainly meant to be provocative. But they're going to get better.

But until they're able to reach beyond their sort of southern talk radio base -- consider this, 48% of all Republican congressional states are held in the 13 states of the old Confederacy, as are 48% of all Senate seats. They are becoming more and more of a regionalized party.

The smarter Republicans like Lindsey Graham and people like that said that they need to break out with people like Tom Ridge. They need to push and reassert themselves. This is the first time tonight, I don't want to say since the Civil War or something like that that Pennsylvania's had two Democratic senators. They understand that. They're going to adjust. But it's going to be sort of a painful adjustment. BLITZER: Who are the people that fear you in the Republican side the most? In other words, who are you worried about when you look down the road?

CARVILLE: You know, what...

BLITZER: Give me an exact.

CARVILLE: As opposed to like give you a name. I would -- what would worry me would be a Republican that's could re-establish some fiscal conservative bonafides. Right now, there's no one. People laugh at them when the Republicans talk about being fiscally responsible because they had such a terrible time when they were in office. But I think that their comeback is going to have to be based around that issue. Now...

BLITZER: But there's got to be a personality that is likable, smart, conservative, who can appeal to, especially younger voters.

CARVILLE: You know, I don't know if they're going to be able to appeal to the younger voters in the long-term. But - and probably unless something goes terribly wrong, they have to re-establish themselves. They got some of their congressional leadership. They just got Barry Cantor...

BLITZER: Eric Cantor.

CARVILLE: Yes, Paul Ryan, not too long ago. But I mean, they have some people, you know, but how much can a congressional leader take a political party? Not very far.

BLITZER: Well what about the -- some of the candidates who didn't make it last time, like Mitt Romney for example?

CARVILLE: I think they're going to...

BLITZER: Newt Gingrich.

CARVILLE: Well, he's full of ideas, he was down at my class at Tulane and we had it on CNN. And I mean, he is going to keep pushing stuff out there. You know I tell you, if it's different kind of thinking he can do that, but he's going to have a hard time getting through the Republican party.

BLITZER: He's not very well know, but I've heard some of your fellow Democrats say they look at someone like the Utah Governor John Huntsman and they get nervous.

CARVILLE: Right. Yeah, these guys, but, again, he has to -- the conservatives in a Republican party don't much care for John Huntsman right now. And it's kind of odd...

BLITZER: He's pretty popular in Utah.

CARVILLE: In Utah. But you know, I mean, Utah's Utah. I mean, it's a great state. I was out there not long ago, but he's going to hahave to expand beyond there. And you know, if the conservatives don't like you in these Republican primaries, it's going to be hard to go very far, really hard to go very far.

BLITZER: It goes without saying. All right, "40 More Years, How the Democrats Will Rule the Next Generation." The author, James Carville.

James, thanks for coming in.

CARVILLE: Thank you, Wolf.

(END VIDEOTAPE)

BLITZER: From outer space to the world of sports, stand by for some of the most eye-catching pictures of the week.

(COMMERCIAL BREAK)

BLITZER: Here's a look at some of the week's hot shots from our friends at the Associated Press. In space, the Hubble telescope received some repairs. From NASA, astronauts. In Bethlehem, on the West Bank, Pope Benedict waved to the crowd during his five-day visit to the region. In Pennsylvania, soccer fans cheered as they learned a new expansion team called the Philadelphia Union would come to the States. And here in Washington, D.C., President Obama received his own University of North Carolina basketball jersey after meeting the 2009 NCAA champs. Some of the week's hot shots, pictures worth 1,000 words.

I'm Wolf Blitzer. Join us weekdays in THE SITUATION ROOM from 4:00 to 7:00 p.m. Eastern and every Saturday at 6:00 p.m. Eastern on CNN and at this time every weekend on CNN International. The news continues next right here on CNN.